Time Inc., Rejecting Bid by Paramount, Will Pursue Warner

Published: June 17, 1989

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Paramount, until recently Gulf and Western Industries, owns a movie studio and a television production operation, as well as Simon & Schuster, the publishing house. It is selling its only noncommunications unit, a financial services business. Lining Up Financing

Under terms of the new Time-Warner deal, Time has lined up $14 billion in bank financing but will spend only half that amount initially.

Time said it would offer $70 a share in cash for 100 million of Warner's nearly 200 million shares.

Time said it had not yet decided whether to offer cash, securities or a combination for the other Warner shares. But it said the offer for the remaining stock would be worth the same $70 a share.

Asked whether the would-be partners were prepared for Paramount's challenge in Delaware Chancery Court, Gerald M. Levin, vice chairman of Time, remarked, ''It's hard to see how a merger under way for two years is a foul ball.''

Mr. Nicholas, Time's president, said, ''We believe the acquisition of Warner by Time is totally lawful.''

He said Wall Street analysts think Warner's value, if the company were broken up, might be around $65. Its assets have a low tax basis, he said, meaning that a breakup at that price could result in a tax bill of $25 a share, leaving $40 a share for stockholders.

For Warner, a possible drawback to yesterday's deal is that it might put the company ''in play,'' bringing in other bidders. But analysts seemed to think that was not much of a problem because the Time bid was high enough to discourage potential rivals. Warner Chief Praises Warner

Asked if Time were overpaying by offering $70, Mr. Ross said, ''This is the gem of all gems.''

''We are the only motion picture company that owns all forms of distribution all over the world,'' he said, ''theatrical, video, magazines, records, tapes, CD's. We can use all of our distribution people to push Time business products throughout the world.''

He said 40 percent of Warner's revenues came from abroad, compared with only 10 percent for Time.

''That's where the ball game is,'' Mr. Ross said. ''It's enormous. The demand for product in all forms is enormous - in Germany, England, France, Japan, not to mention the future prospects of Russia and China.'' He said that Warner was holding discussions in both the Soviet Union and China. He declined to give any details.

In the Delaware courts, a crucial question is likely to be whether the precedents established in the Macmillan Inc. case apply, lawyers who are not involved in the Time-Warner-Paramount battle said yesterday.

In that case, the court forced Macmillan to be sold to the British publisher Robert Maxwell and blocked management efforts to take control of the company.

Time advisers said they would argue that the precedent was irrelevant, because Time was not for sale and control of the company was not changing hands.

Asked whether there was any change in his generous financial arrangements with Time that were part of the earlier deal, Mr. Ross said ''Not 10 cents.''